Q1 2025 - Market Update
Let’s begin with a simple analogy.
Imagine two countries:
Country A – Large, full of meadows and farmland, with abundant fresh water and hardworking citizens. They grow wheat, corn, and raise livestock.
Country B – A small, rocky island with resilient people skilled in fishing and aquaculture. Grain farming fails there due to salty air and storms.
They decide to trade—Country A sends grain, Country B sends fish. Both prosper.
This is the essence of free trade, fueled by natural differences in resources, climate, labor, and skills. It has shaped globalization for over 200 years.
On April 2, however, everything changed.
The U.S. implemented one of the most significant disruptions to free trade in half a century.
Below is an objective, apolitical breakdown of what happened, why, and what comes next.
Uncertainty, Ugliness, and Ugh
Here’s the timeline of the major tariff-related events over the past few months:
January
Jan. 14 – President-elect Trump announces the External Revenue Service to manage tariffs.
Jan. 26 – The U.S. avoids a trade conflict with Colombia after negotiations involving migrant flights.
February
Feb. 1 – National emergency declared. Tariffs imposed:
25% on imports from Canada & Mexico
10% on imports from China
10% on Canadian energy
Feb. 3–10 – A series of delays and partial pauses on these tariffs.
March
March 4 – 25% tariffs on all imports from Canada & Mexico; +10% more on China.
March 6 – Partial one-month pause for USMCA-covered goods.
March 12 – Global steel & aluminum tariffs rise to 25%.
March 31 – The United States Investment Accelerator is established.
April
April 2 – “Liberation Day” announcement:
Universal 10% tariff on all imported goods (effective April 5).
Reciprocal tariffs on countries with large trade surpluses:
China: 34%
Taiwan: 32%
Japan: 24%
European Union: 20%
As a result, the S&P 500 fell nearly 9% in 48 hours and global markets lost around $8 trillion in value.
But… Why?
Despite strong U.S. economic performance in recent years, the administration has two clear goals:
1. Rebuild U.S. manufacturing.
For reasons tied to economic sovereignty and national defense, there is a push to bring production back onshore.
2. Reduce the trade deficit.
America has long imported far more than it exports, financing the gap by issuing debt.
Tariffs are now being used to force a structural shift.
Whether one agrees or disagrees, the objectives are explicit—and the speed is unprecedented.
Why Does This Matter?
Rapid and aggressive tariffs:
Slow economic growth
Increase consumer prices
Create uncertainty for businesses & investors
Uncertainty is the biggest problem.
Companies worldwide are now asking:
“Do we relocate factories?”
“Will tariffs be reversed?”
“Will other countries retaliate?”
“Should we rework entire supply chains?”
Investors are trying to price in a new global reality that arrived virtually overnight.
What Happens Next?
Retaliation has already begun—China and others are matching U.S. tariffs.
Expect volatility: large down days, large up days, and general market instability.
Three possible paths forward:
1. The administration reverses course.
Markets would likely rally sharply.
2. The administration doubles down.
Markets may fall further, increasing pressure for eventual reversal.
3. The administration maintains course.
After a turbulent adjustment period, the world would begin realignment:
More domestic European investment
Manufacturing returning to the U.S.
Long, slow rebuilding of new supply chains
Remember: globalization took 80 years to build—undoing it won’t happen quickly.
Final Thoughts
We have been through worse:
1987 Black Monday – markets fell more than 20% in a single day.
2007–2008 crisis – markets lost nearly half their value.
And yet, long-term market charts barely show those dips today.
Capital markets are extraordinarily resilient. They evolve, innovate, and adapt—even in the face of dramatic policy shifts.
Buckle up. Volatility is here, and there will be much to unpack in the months ahead.
We will continue monitoring closely and remain at your service.
We remain at your service and watching closely.
Daken J. Vanderburg, CFA
Chief Investment Officer
MassMutual Wealth Management